Not warm and fuzzy news for you if you were planning on getting a mortgage with Nationwide.

That is because the UK's biggest building society will be increasing their mortgage rates due to the credit crunch.

Only last month, the Nationwide didn't endear itself to many of you trying to get on the mortgage ladder with the announcement that you would require at least a 25% deposit if you were a first time buyer.

From today, Nationwide will add another 0.6% onto the cost of some fixed-rate mortgages and tracker mortgages. They said it was due to "significant increases" in the cost of funding and recent moves by other mortgage lenders.

Nationwide will also remove its lowest priced two-year fixed-rate deal and two tracker mortgages, including a fee-free deal.

While the society sympathised with anyone who was concerned about the availability of affordable mortgages, Nationwide's director of mortgages, Matthew Carter, said that:

"We continue to offer our customers a wide range of fixed and variable rate mortgages up to 95% loan-to-value with, as always, a focus on prudent and responsible lending rather than volume."

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The increase, (only applying to new mortgages) will see an average of 0.2% added to the cost of Nationwide's fixed-rate mortgages.

This means that the rate on its 2 year deal for house purchasers with a 25% deposit has risen to 5.95%.

Nationwide has now increased the rates on its tracker mortgages twice since last November and their 2 year tracker mortgage will now cost 0.57% starting at a rate of 6.4% for loans of less than 75% of a property's value.

In addition, the cost of their lifetime tracker mortgage will rise by 0.51% to 6.59%.

The mortgage market has been a hive of activity in recent few weeks as lenders have battened won the hatches as they seek to weather the credit crunch. Lenders have repriced deals, made their lending criteria stricter and even removed some deals altogether.

This week Standard Life became the latest to withdraw their 100% mortgage deals, while several small building societies have pulled out of the mortgage market completely.

Ray Boulger, of broker John Charcol, said the changes to Nationwide's tracker rates were "very severe", but the new fixed rates reflected recent moves in the money markets:

"Last summer you could get a tracker mortgage for 0.25% below base rate, but now they are at least 1% above. "Even after a cut in interest rates in April, new borrowers on tracker deals will be paying more than they would have been last year when the base rate peaked at 5.75%."

As a result, Boulger said fixed-rate mortgages were looking like a better deal for many borrowers, as on top of offering security they were also in many cases offering a lower rate.

Even though the market is tighter you can still find a good mortgage deal, especially if you use an impartial adviser who can search all mortgage lenders, some you may never have heard of, to find the best deal for your situation.

(Please note that articles on Money Hospital do not constitute regulated financial advice. The articles are intended to provide general personal financial information. We urge you to consult an Independent Financial Adviser (IFA) before making any important decisions about your finances. All rates are correct at time of printing but are subject to change without notice.)

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